Real Estate Development Investment Falls for Third Consecutive Month

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Chinese real estate development investment has continued to decline amidst a tightening of funds and lacklustre sales.

Key indices including real estate development investment, construction starts floorspace and the paid-in investment of real estate development enterprises fell for the third consecutive month in July, according to the “2019 July National Real Estate Market Report” (2019年7月全国房地产市场报告) issued by the Shanghai E-house Real Estate Research Institute on 14 August.

During the first seven months of 2019 the real estate enterprise land purchase area was 97.61 million square metres, for a YoY decline of 29.4%, 1.9 percentage points ahead of the YoY decline for January – June.

The land transaction sum for January – July was 479.5 billion yuan, for a YoY decline of 27.6%, on par with the drop for January – June.

Shanghai E-house’s “2019 July 40 City Land Inventory Report” (2019年7月40城土地库存报告) further indicates that the land inventory floorspace for 40 cities monitored was 710.05 million square metres as of the end of July, for an on-month rise of 3.9% and a YoY rise of 13%.

As of the end of July the land inventory floorspace for first-tier cities was 58.05 million square metres, for growth of 4.7% YoY, while for second-tier cities it was 426.12 million square metres, for on-month growth of 5.5% and YoY growth of 25.3%.

For third and fourth-tier cities the land inventory floorspace was 225.88 million square metres, for a YoY decline of 3.1% yet an on-month increase of 1.9%.

Shanghai E-house forecasts that over the next five months the monthly average land transaction floorspace will fall 46.1% compared to the July benchmark.

Wang Ruochen (王若辰), researcher with Shanghai E-house, told state media that a cooling of the land market over the next several months is almost certain, and that commercial housing sales floorspace is also likely to contract.

According to Wang developers will continue to prefer to acquire land in second-tier cities as opposed to third and fourth-tier cities for the foreseeable future.

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